In this article, we’ll explore Jim Cramer’s Top 10 Must-Watch Stocks for Savvy Investors.
Friday Madness
In a recent episode of Mad Money, Jim Cramer described September 6, Friday, as a dismal trading day following a critical non-farm payrolls report. Bulls hoped for weaker-than-expected hiring and steady wages to prompt the Federal Reserve to consider cutting rates. They got what they wished for, but this led to a surprising turn of events: instead of rallying, the market saw a sharp decline, with the Dow falling 410 points, the S&P dropping 1.73%, and the NASDAQ plummeting 2.55%.
“What an ugly day. Just hideous. We came into today knowing we’d have a critical non-farm payrolls report. If you were a bull, you wanted to see weaker-than-expected hiring with wages pretty much in line, because that’s what the Fed needs to see before it can start cutting rates. Voila, we got exactly what we wished for. Maybe we should have been careful, though, because as soon as we got what we wanted, the bulls vanished and the sellers came out of the woodwork, crushing practically everything. The Dow fell 410 points, the S&P plunged 1.73%, and the NASDAQ plummeted 2.55%.”
Cramer noted that September often brings significant profit-taking, making it historically the weakest month for the market. While this might seem like circular reasoning, it’s more plausible than suggesting that fear of a severe economic slowdown drives the sell-off. In fact, big tech companies, which are central to ongoing powerful trends like data centers and accelerated computing, should be seen as buying opportunities during market dips.
“This market has a September problem. Come September, we’re always hit with a tremendous amount of profit-taking, which is why it’s the weakest month of the year. I know that’s somewhat circular reasoning—we sell because we’ve always sold—but it makes more sense than saying people sold tech because they fear a hard landing. Tech, especially big tech, is something you buy, not sell, into weakness if you’re worried about a more severe slowdown.
Why? Well, because big tech is all about powerful secular themes that can keep going even during a recession—and we’re not getting one. I’m talking about the data center, accelerated computing—they’re not going anywhere. Nevertheless, when anything jars the big tech themes of the moment, the market’s reaction is swift, harsh, and horrible.”
Jim Cramer discussed the aftermath of NVIDIA’s recent report, noting that despite his belief that AI is not a bubble, the stocks related to AI have seen substantial gains, particularly in August. He pointed out that September often triggers increased selling, even when companies report results that meet expectations.
“Look at what happened after the company reported last night. I don’t believe AI is a bubble, but these stocks are still up a great deal, especially in August. And September tends to bring out sellers when you get just in-line numbers.”
The Upcoming Debate Between Harris and Trump
Jim Cramer also commented on the upcoming debate between Vice President Harris and former President Trump, scheduled for Tuesday night. He questioned how much the economy will be a focus, speculating that Trump might try to link Harris to recent inflation trends, while Harris may present herself as a more moderate alternative to President Biden.
“Tuesday night’s the great debate between Vice President Harris and former President Trump. I don’t know how much of a role the economy will play in the debate. If Trump’s on his game, he’ll try to tie Harris to the inflation we’ve experienced since COVID. I suspect that Harris will try to portray herself as more moderate than President Biden.
Either way, I doubt there’ll be anything specifically market-moving, even if the candidates say something newsworthy about their tax plans. Keep in mind that the winner in November likely won’t have the Senate votes to totally rework the tax code, whether we’re talking about Harris’s capital gains tax or Trump’s 19th-century-style tariffs.”
Jim Cramer Urges Investors: “Please Do Not Give Up the Ship Here”
Then he discussed the upcoming release of the Consumer Price Index (CPI) on Wednesday, which will provide another update on inflation. He emphasized that if inflation remains steady or decreases, the Federal Reserve will have more flexibility to lower interest rates and potentially avoid a recession, addressing concerns from many sellers. Cramer urged investors to stay confident and not to abandon their positions based on these uncertainties.
“Wednesday, we get another read on inflation—this time from the Consumer Price Index. What can I say? As long as inflation stays the same or goes lower, the Fed has plenty of leeway to cut interest rates and prevent a recession—the thing so many sellers are worried about. That’s why I keep telling you, please do not give up the ship here.”
Our Methodology
The article reviews a recent episode of Jim Cramer’s Mad Money, where he discussed and recommended several stocks. It focuses on ten companies that Cramer featured and details how hedge funds view and invest in these companies. The article ranks these companies based on their ownership levels among hedge funds, from those least owned to those most owned.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Jim Cramer’s Top 10 Must-Watch Stocks for Savvy Investors
10. GameStop Corp. (NYSE:GME)
Number of Hedge Fund Investors: 12
Last Friday, GameStop Corp. (NYSE:GME) saw a boost in its share price after Keith Gill, known as “Roaring Kitty,” posted a picture of “Toy Story” on X. Despite the buzz, Jim Cramer points out that GameStop Corp. (NYSE:GME), the original meme stock, frequently creates high expectations that don’t always materialize into meaningful results, such as earnings-per-share growth. Cramer suggests that GameStop Corp. (NYSE:GME) needs to present a solid long-term business strategy, or its quarterly report might once again fall short of expectations.
“Tuesday, GameStop reports, and that always seems to stir up animal spirits. In fact, GameStop Corp.(NYSE:GME) shares popped today after Keith Gill, aka “Roaring Kitty,” posted a picture of “Toy Story” on X. Yeah, seriously. The original meme stock always seems to have a lot of promise but never translates into anything real—like earnings-per-share growth. It’s time for the company to reveal a long-term business plan, or the quarter will just land with a thud again.”
GameStop Corp. (NYSE:GME) is currently facing financial challenges, as reflected in its recent performance and future projections. GameStop Corp. (NYSE:GME)’s Q2 2024 earnings report, due on September 10, 2024, is expected to reveal a significant drop in revenue to $900 million, compared to $1.16 billion a year earlier. Comparable store sales are predicted to decline by 23%, and GameStop Corp. (NYSE:GME) is forecasted to post a net loss of about $5.3 million, which is worse than the $2.8 million loss from the same quarter last year but an improvement from the $32.3 million loss in Q1 2024.
These issues are part of a broader trend affecting the retail sector, where consumers are cutting back on spending on non-essential items like video games. Despite these difficulties, GameStop Corp.(NYSE:GME) is trying to revitalize its brand by converting some stores into retro gaming locations that focus on older gaming consoles. This move could attract nostalgic customers and offer a new revenue stream.
GameStop Corp. (NYSE:GME)’s stock, which has risen by over 25% this year, shows some investor optimism despite the underlying problems. A bullish view would suggest that if GameStop Corp. (NYSE:GME) can successfully tap into the retro gaming trend and improve its operations, there could be potential for a turnaround. GameStop Corp. (NYSE:GME)’s history of volatility and its appeal to speculative investors might also contribute to future gains, provided the company can overcome its current financial challenges.
9. Eastman Chemical Company (NYSE:EMN)
Number of Hedge Fund Investors: 28
Jim Cramer believes that the CEO of Eastman Chemical Company (NYSE:EMN) is highly intelligent, noting that he has personally met with him. Cramer views Eastman Chemical Company (NYSE:EMN)’s stock as a strong investment in the plastics sector, especially considering its 3% dividend yield. In his opinion, it stands out as one of the better options available in the market for plastic stocks.
“Yes, the CEO of Eastman Chemical is a very smart guy. I’ve sat down with him, too, and I think the stock, with a 3% yield, is one of the better plastic stocks in the market.”
Eastman Chemical Company (NYSE:EMN) has reported strong financial results, with a 2% increase in sales revenue to $2.36 billion, thanks to higher sales in its Advanced Materials segment, despite a drop in raw material prices. Eastman Chemical Company (NYSE:EMN)’s adjusted earnings per share (EPS) improved to $2.15 from $1.99 last year, reflecting its ability to manage operations effectively and maintain pricing discipline.
Eastman Chemical Company (NYSE:EMN)’s focus on innovation, particularly in circular economy initiatives, supports a positive outlook. Eastman Chemical Company (NYSE:EMN)’s methanolysis facility in Kingsport is advancing in recycling difficult plastics and is expected to boost EBITDA by about $50 million in 2024. This effort not only promotes sustainability but also strengthens Eastman Chemical Company (NYSE:EMN)’s position in the growing market for recycling solutions.
Additionally, Eastman Chemical Company (NYSE:EMN) reported strong cash flows of $367 million in Q2 and returned $195 million to shareholders through dividends and share buybacks. With a forecasted full-year EPS between $7.40 and $7.85 and a cash flow target of $1.4 billion, Eastman Chemical Company (NYSE:EMN) shows robust financial health. Although there are some concerns about weak demand in the latter part of 2024, Eastman Chemical Company (NYSE:EMN)’s solid financial performance, commitment to sustainability, and shareholder returns make it an attractive investment opportunity.
ClearBridge Sustainability Leaders Strategy stated the following regarding Eastman Chemical Company (NYSE:EMN) in its Q2 2024 investor letter:
“Helping companies meet these new rules will be ClearBridge holding Eastman Chemical Company (NYSE:EMN), which makes a range of advanced materials, chemicals and fibers for everyday purposes, among them plastics for food packaging. In a recent engagement with Eastman Chemical we discussed two different chemical recycling technologies it has developed: polyester renewal technology (‘PRT’) and carbon renewal technology (‘CRT’). PRT recycles polyester-based materials such as soda bottles, carpet fibers and even clothing, breaking down their basic molecules until they are indistinguishable from materials made from virgin or nonrecycled content.
CRT operates in a similar way but can take a broader range of plastic types and replaces the use of coal as a feedstock to make fibers. Combining these two technologies gives Eastman a competitive advantage in molecular recycling, as it can take most types of waste plastics (Exhibit 1). Ironically, securing feedstock (i.e., waste plastic) has been a bottleneck to scaling molecular recycling as competitor technologies not using Eastman’s dual technologies often require the waste plastic to be separated purely according to grade, which waste and recycling companies do not readily offer. Eastman’s dual technology approach allows it to accept most plastic grades, making it less reliant on waste companies’ sorting…” (Click here to read the full text)
8. Signet Jewelers Limited (NYSE:SIG)
Number of Hedge Fund Investors: 33
Cramer points out that Signet Jewelers Limited (NYSE:SIG) has had a strong performance in previous quarters, though the last report was poorly received. He commends CEO Gina Drosos for her efforts to turn Signet Jewelers Limited (NYSE:SIG) around, noting that she has been a guest on his show multiple times. Despite some ongoing challenges, Cramer believes Signet Jewelers Limited (NYSE:SIG)’s stock is currently undervalued. However, he also warns that the stock’s high volatility means it might be too risky for more cautious investors.
“Now, it’s a very quiet time for corporate earnings, but not on Thursday. At the open, we hear from Signet Jewelers. Signet is a total hot-button story because we’ve seen a terrific string of quarters—until the last one, which was definitely poorly received. I think CEO Gina Drosos has really turned the company around. She’s been on the show many times, and while there are some hiccups, I believe the stock is relatively inexpensive. That said, Signet is such a wild trader that I’d put it in the category of “not for the squeamish.”
In its Q2 2024 earnings report, Signet Jewelers Limited (NYSE:SIG) exceeded analyst expectations with adjusted earnings per share (EPS) of $1.55, though this was down from $2.68 a year ago. Signet Jewelers Limited (NYSE:SIG)’s sales were $1.61 billion, which was lower than the previous year’s $1.75 billion but still better than expected. Same-store sales fell by 12%, reflecting broader challenges in the retail sector. Despite this, Signet Jewelers Limited (NYSE:SIG) has raised its full-year EPS forecast to between $9.55 and $10.14, showing optimism about its future performance.
Signet Jewelers Limited (NYSE:SIG) has been effectively managing economic challenges through cost-saving measures, investments in digital capabilities, and a focus on engagement jewelry. Its strong cash flow supports ongoing dividend payments and business investments. For Q3 2024, Signet Jewelers Limited (NYSE:SIG) expects sales to be between $1.36 billion and $1.41 billion. While consumer spending is currently weak, Signet Jewelers Limited (NYSE:SIG)’s ability to surpass earnings expectations and improve its annual outlook highlights its potential for long-term growth, supported by its strong brand and digital retail strategies.
7. Lululemon Athletica Inc. (NASDAQ:LULU)
Number of Hedge Fund Investors: 45
Jim Cramer discusses Lululemon Athletica Inc. (NASDAQ:LULU)’s recent performance, noting that the stock has fallen significantly from its highs last December, down by half. After Lululemon Athletica Inc. (NASDAQ:LULU)’s mixed earnings report a little over a week ago, which showed no real signs of improvement, the stock barely moved and has since declined further by more than 2% amid a weaker market. While Cramer is hopeful for Lululemon Athletica Inc. (NASDAQ:LULU)’s turnaround, he is not ready to endorse the stock as a buy at this time.
“Now, let’s talk about Lululemon. Going into last week’s earnings report, the stock had already been cut in half from its highs last December. When the company posted its numbers a little over a week ago, the results were mixed at best, with no real signs of a turnaround. The stock barely reacted to the numbers, but as the market weakened this week, Lululemon stock declined more than 2%.
The truly sad part is that, until late last year, Lululemon was one of the greatest growth stories of the past 15 years. You could have bought it for single digits during the Great Recession. Now, it’s at $253 and change, which is an incredible long-term move. But it’s a lot less impressive when you remember Lululemon was a $500+ stock about nine months ago.
So, is there any hope for a comeback? Given the company’s historic track record, I think we owe it to ourselves to take a look. Unfortunately, while there are some positives, they’re not enough to make me a believer again. Not yet. And you need to be a believer if you’re going to recommend a stock that’s been cut in half in less than a year. I just can’t do that, for several reasons.
You could argue that Lululemon is worth buying purely on the basis of valuation. It sells for roughly 18 times the midpoint of this year’s earnings estimates, and historically, the stock has sold for a whopping 43 times earnings over the past five years. But to make an argument based on valuation, you need to believe there won’t be any more cuts to the numbers. I can’t say that with confidence when it comes to Lululemon — at least not yet, not with this much competition.
Here’s the bottom line: I’m rooting for Lululemon to make a comeback, absolutely. But with so much lower-priced competition, I’m simply not ready to stick my neck out on this one. As much as I think Calvin McDonald is a total pro, this is still a “show-me” story.”
In its Q2 2024 earnings report, Lululemon Athletica Inc. (NASDAQ:LULU) reported $2.4 billion in revenue, a 7% increase from the previous year, but this was below analyst expectations, especially in the Americas where sales only grew by 1%. Despite this, Lululemon Athletica Inc. (NASDAQ:LULU) remains highly profitable, with earnings per share (EPS) projected between $2.68 and $2.73 for Q3 2024, and an annual EPS forecast of $13.95 to $14.15.
Lululemon Athletica Inc. (NASDAQ:LULU)’s growth strategy, called “Power of Three ×2,” aims to double its revenue from men’s products, e-commerce, and international sales by 2026, increasing from $6.25 billion in 2021 to $12.5 billion. Lululemon Athletica Inc. (NASDAQ:LULU) is in a strong financial position with $1.6 billion in cash and reduced inventory, setting the stage for continued expansion despite current challenges. Short-term issues, like the disappointing Breeze through leggings launch and increased competition from brands such as Alo Yoga and Vuori, have affected recent performance.
However, Lululemon Athletica Inc. (NASDAQ:LULU)’s focus on innovation and global growth suggests a strong long-term potential. Analysts have set an average price target of around $354.95, indicating a nearly 40% potential upside from current levels, making it an attractive investment for those with a long-term view.
Middle Coast Investing stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its Q2 2024 investor letter:
“I mentioned last quarter and higher above that I like buying quality stocks on sale. Lululemon Athletica Inc. (NASDAQ:LULU), the 2nd worst performer in the S&P 500 this year, qualifies. I published a full thesis on the stock before its most recent earnings, but the basics: the yoga pants and clothing company has had an amazing post pandemic run that is approaching its end.
Its growth in the U.S. is slow/non-existent at the moment, but it is growing very fast in China and Europe. I think that international growth is likely to endure, and that its U.S. slowness is likely to be temporary. Lululemon shares are not ‘cheap’, but they are on sale for an average price, and I think the company will grow faster than average over the next five years. I would be wrong if Lululemon is a fad gone bust, or faces a huge post-pandemic hangover as people get used to leaving the house more. We’ll see.”
6. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Investors: 46
Jim Cramer comments on The Kroger Co. (NYSE:KR)’s forthcoming report and its pursuit of acquiring Albertsons. He anticipates that The Kroger Co. (NYSE:KR) will argue that the merger is crucial and not monopolistic because they have few overlapping stores and plan to sell any that do overlap to well-capitalized competitors. However, Cramer is skeptical about whether these arguments will persuade the Federal Trade Commission, which seems set on blocking the deal.
“Kroger reports, the giant grocery chain, and I think it will once again talk about how much it needs to close the deal to buy Albertsons, and why there’s nothing monopolistic about the merger. They don’t have too many overlapping stores, and they plan to divest the ones that do overlap to well-financed competitors. I’m just not sure any of that matters because the Federal Trade Commission seems determined to block the deal no matter what. Which means Kroger stock will have to stand or fall on its own merits. Fortunately, its own merits are pretty darn good.”
The Kroger Co. (NYSE:KR) is an attractive investment due to its steady earnings and strong financial performance. For Q2 2024, analysts expect The Kroger Co. (NYSE:KR) to report earnings of $0.913 per share and revenue of about $34.12 billion. Despite a slight drop in sales, The Kroger Co. (NYSE:KR) remains profitable thanks to its focus on grocery operations and its investments in digital technology and customer loyalty programs.
Additionally, a potential merger with Albertsons could provide significant benefits, such as increased market share and operational efficiencies, which would strengthen The Kroger Co. (NYSE:KR)’s competitive position and growth outlook. This mix of reliable current performance and promising future opportunities makes The Kroger Co. (NYSE:KR) a compelling choice for investors seeking stability and growth.
5. The Blackstone Group Inc. (NYSE:BX)
Number of Hedge Fund Investors: 58
Jim Cramer acknowledges that he lacks strong conviction about The Blackstone Group Inc. (NYSE:BX)’s short-term prospects, noting that the stock has recently risen from the $120s to the $130s. However, he is very impressed with The Blackstone Group Inc. (NYSE:BX)’s long-term potential, particularly praising Jonathan Gray and his team for their strategic moves in the data center sector this week.
“Near term, I don’t have a lot of conviction. Blackstone has had a very big run, from the 120s to the 130s. Longer term, I think Jonathan Gray and his team are simply brilliant, and their actions this week in the data center are very strong. I like it.”
In Q2 2024, The Blackstone Group Inc. (NYSE:BX) reported substantial revenue growth of 166.9% compared to the previous year. While its earnings per share (EPS) of $0.96 slightly missed estimates by $0.03, the company’s overall performance remains strong. This strength comes from its diverse investments in real estate, private equity, and credit markets, which help it handle market fluctuations well. The Blackstone Group Inc. (NYSE:BX) also offers a steady dividend yield of 2.34%. The Blackstone Group Inc. (NYSE:BX)’s stock has performed well, up about 4.7% year-to-date and trading around $137, close to its 52-week high of $145.16.
Analysts are positive, with a target price of $128.94, and they expect continued growth due to The Blackstone Group Inc. (NYSE:BX)’s expansion into new areas like infrastructure and life sciences. Although The Blackstone Group Inc. (NYSE:BX)’s high price-to-earnings ratio of 46.27 suggests it is priced at a premium, Blackstone’s strong leadership in alternative investments and its diversified revenue sources support a favorable outlook.
Baron Real Estate Fund stated the following regarding Blackstone Inc. (NYSE:BX) in its fourth quarter 2023 investor letter:
“We remain optimistic about the long-term prospects for Blackstone Inc. (NYSE:BX) and Brookfield because we believe both companies are likely to increase market share in a secular growth opportunity for alternative assets.
Institutional allocations to alternative investment assets such as real estate, infrastructure, and private equity are likely to continue to grow significantly in the years ahead because alternatives have a long track record of generating attractive relative and absolute returns with less volatility than several other investment options.
We are bullish on the long-term prospects for Blackstone and Brookfield. Both companies are led by exceptional management teams that attract and retain exceptional talent. They are two of the largest real estate managers in the world with impressive investment track records. Both Blackstone and Brookfield have global franchises, strong brands, and loyal customers. We believe the shares of both companies are attractively valued and are optimistic about the long-term potential for the Fund’s investments in both companies.”
4. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Investors: 84
Jim Cramer points out that Lam Research Corporation (NASDAQ:LRCX)’s stock has dropped significantly, from $1,300 to $730. He believes this decline may be an overreaction given Lam Research Corporation (NASDAQ:LRCX)’s strong performance and fundamentals. While he sees this as a buying opportunity, Cramer advises a cautious approach. He suggests buying Lam Research Corporation (NASDAQ:LRCX) gradually rather than all at once to avoid potential losses.
“Lam Research is going down too much now. I know this is dangerous to say, but when you have a phenomenal company like Lam Research, and it’s down from $1,300 to $730, that to me is an overreaction. I’d rather be a buyer, but buy it slowly — don’t buy it all at once, as that will only lead to pain.”
In its June 2024 earnings report, Lam Research Corporation (NASDAQ:LRCX) revealed $3.87 billion in revenue, largely driven by strong system sales and customer support services. Lam Research Corporation (NASDAQ:LRCX)’s performance was solid, with a rise in customer support revenue from the previous quarter. Its broad global presence, including significant revenue from China, positions it well to benefit from the growing demand for semiconductors.
Looking forward, Lam Research Corporation (NASDAQ:LRCX) projects revenues of $4.05 billion for the September 2024 quarter, indicating continued growth. Lam Research Corporation (NASDAQ:LRCX) has also increased its quarterly dividend by 15%, showing confidence in its long-term success. Ongoing investments in research and development further strengthen Lam Research Corporation (NASDAQ:LRCX)’s role in the semiconductor equipment market, especially as the need for advanced chips continues to rise.
Artisan Select Equity Fund stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its Q2 2024 investor letter:
“The top contributors to performance for the quarter were Alphabet, Lam Research Corporation (NASDAQ:LRCX) and Elevance. Lam Research shares rose 10% during the quarter and are up 67% over the past year, primarily due to optimism around the pending investment cycle in semiconductor capital expenditures. Lam is one of the largest equipment manufacturers used to make semiconductor chips.
This equipment, commonly referred to as WFE (wafer fabrication equipment), is expected to experience significant growth due to a combination of a cyclical rebound in memory chips and growing demand for new AI-related chips. Lam’s product portfolio is particularly well positioned to benefit from both trends and should grow even faster than the overall market. Its shares now trade at ~30X prior peak earnings, which suggests this dynamic is well understood by the market and is mostly priced in.”
3. Oracle Corporation (NASDAQ:ORCL)
Number of Hedge Fund Investors: 93
Jim Cramer highlights that Oracle Corporation (NASDAQ:ORCL) has successfully reinvented itself by adding a strong AI component to its existing enterprise software business. He notes that Oracle Corporation (NASDAQ:ORCL)’s performance has been exceptional in recent quarters and believes the company will continue this trend. Cramer suggests that Oracle Corporation (NASDAQ:ORCL) could play a significant role in stabilizing the tech sector.
“Oracle has reinvented itself with an AI kicker to go with its regular enterprise software business. As of last quarter, it’s been performing exceptionally well, and I think they’re going to do it again. Oracle Corporation (NASDAQ:ORCL) could stop the tech blood flow.”
Oracle Corporation (NASDAQ:ORCL) is well-positioned for growth, particularly due to its strong performance in cloud infrastructure amid rising AI demand. Oracle Corporation (NASDAQ:ORCL)’s Oracle Cloud Infrastructure (OCI) is a key asset, attracting major clients such as NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT), and OpenAI. OCI’s ability to efficiently train large language models at lower costs gives Oracle a significant edge in the competitive AI market.
Moreover, Oracle Corporation (NASDAQ:ORCL)’s autonomous database systems improve efficiency and reduce costs for its clients. Looking ahead to Q1 2025, Oracle Corporation (NASDAQ:ORCL) is projected to see a 6% increase in revenue, reaching approximately $13.23 billion, driven mainly by its cloud services. Oracle Corporation (NASDAQ:ORCL) expects OCI to grow by over 50% year-over-year in fiscal 2025, reflecting strong demand for its AI-related offerings.
Additionally, Oracle Corporation (NASDAQ:ORCL)’s performance obligations have surged by 44%, suggesting a healthy future revenue pipeline. Despite a high debt load, Oracle Corporation (NASDAQ:ORCL)’s aggressive expansion in cloud infrastructure and its ambitious goal of $65 billion in revenue by 2026 provides a positive outlook. Although Oracle Corporation (NASDAQ:ORCL) has gained more than 35% this year and valuation concerns exist, analysts remain confident in the continued strong demand for Oracle’s cloud solutions, making it an attractive investment.
Ariel Focus Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its Q2 2024 investor letter:
“Global leader in enterprise software, Oracle Corporation (NYSE:ORCL), was the top contributor to relative performance in the period. ORCL is benefitting from a significant expansion in artificial intelligence (AI) demand and strong booking growth with OpenAI. We believe these results highlight ORCL’s ability to effectively cross-sell and upsell apps and infrastructure, as well as the emergence of the company’s cloud platform as a competitive offering.
In addition, ORCL announced a meaningful partnership with Google Cloud mirroring its existing partnership with Microsoft Azure. The company’s ability to leverage the services of both companies without having to rewrite the application helps differentiate and improve ORCL’s positioning in the database market. Furthermore, management provided strong guidance for fiscal 2025, including a double-digit increase in total revenue, with growth accelerating throughout the year.”
2. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Investors: 107
Jim Cramer notes that Adobe Inc. (NASDAQ:ADBE) will report its earnings after the market closes. He points out that three positive analyst reports before this quarter’s results are a strong bullish signal. However, Cramer acknowledges that Adobe Inc. (NASDAQ:ADBE)’s status as a tech company with an AI component has introduced some skepticism, making it face more scrutiny than usual. Despite this, he believes that the aggressive promotion by analysts suggests a positive outcome for Adobe Inc. (NASDAQ:ADBE), making it an appealing prospect for investors.
“Adobe Inc. (NASDAQ:ADBE) reports after the close. We’ve had three positive analyst notes ahead of this quarter, which is extremely bullish. Against that, of course, is the fact that Adobe is a tech company with an AI component, which is now suddenly “guilty until proven innocent”—a complication to an otherwise magnificent story. That said, I sense this should be a good result for the bulls, given that the analysts are promoting it so aggressively ahead of the quarter.”
Adobe Inc. (NASDAQ:ADBE) is a strong investment opportunity due to its solid financial performance, diverse product lineup, and strategic focus on AI and cloud services. In Q2 fiscal 2024, Adobe Inc. (NASDAQ:ADBE) reported record revenue of $5.31 billion, up 10% from the previous year. This growth was driven by strong performances in its Creative Cloud, Document Cloud, and Experience Cloud, with the Digital Media segment increasing by 11% and Document Cloud by 19%.
A major growth factor for Adobe Inc. (NASDAQ:ADBE) is its early adoption of AI technology. Its AI-powered tools, which boost productivity in Creative and Document Cloud services, are gaining popularity. Adobe Inc. (NASDAQ:ADBE)’s confidence in its future is clear from its raised targets for fiscal 2024, highlighting strong subscription growth and a growing customer base for its AI solutions.
Adobe Inc. (NASDAQ:ADBE)’s financial health is robust, with $1.94 billion in cash flow from operations and a notable share repurchase of 4.6 million shares, demonstrating its solid liquidity and commitment to returning value to shareholders. Adobe Inc. (NASDAQ:ADBE) expects Q3 2024 revenue between $5.33 billion and $5.38 billion, setting the stage for continued growth.
Polen Global Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q2 2024 investor letter:
“With Adobe Inc. (NASDAQ:ADBE), in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings.
In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”
1. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Investors: 130
Jim Cramer discusses Broadcom Inc. (NASDAQ:AVGO)’s recent earnings report, noting some weakness in AI orders that caused a broader decline in tech stocks. While Cramer believes AI is not a bubble, he observes that tech stocks, which have been performing well, experienced a sell-off in September, particularly after Broadcom Inc. (NASDAQ:AVGO)’s report met expectations but did not exceed them.
Cramer mentions that Melius Research MD Ben Reitzes suggested that Broadcom Inc. (NASDAQ:AVGO)’s struggles might be due to some fluctuations in orders from Alphabet Inc. (NASDAQ:GOOG), a point not explicitly clear from the earnings call but one that makes sense to Cramer. Despite these, he still expects Broadcom Inc. (NASDAQ:AVGO) to recover.
“Broadcom gave us results that showed a tad bit of weakness in artificial intelligence orders, and the pin action took down the whole darn cohort. I don’t believe AI is a bubble, but these stocks are still up a great deal, especially in August. And September tends to bring out sellers when you get just in-line numbers. That’s what we got from Broadcom. It was in line, it wasn’t a shortfall.
Ben Reitzes, who I quote a lot because he’s really smart, said Broadcom was hurt by some choppiness in Google orders. That wasn’t clear from the conference call, but it makes a lot of sense. That business will bounce back.
The issue here isn’t Broadcom’s reaction, which took down most of the tech. No, it’s the overreaction to Broadcom that seemed to cascade into finance and then anything cyclical. The pain was palpable. To me, this is all about the zeitgeist, not the facts, because so many companies are doing well despite the slowing economy. However, you can’t waste time arguing with the sellers who suddenly want nothing whatsoever to do with this market. Nothing’s going to stop them from taking profits out of fear.”
Broadcom Inc. (NASDAQ:AVGO) is a strong investment opportunity, driven by impressive financial results and its key role in AI and semiconductor markets. In fiscal Q3 2024, Broadcom Inc. (NASDAQ:AVGO) reported a substantial 47.3% increase in revenue, reaching $13.07 billion, which exceeded analyst expectations. This growth is mainly due to its successful AI semiconductor solutions and the integration of VMware, which added $5.8 billion to its revenue. Broadcom Inc. (NASDAQ:AVGO)’s AI segment is expected to generate $12 billion in fiscal 2024, thanks to its advanced AI networking and custom compute solutions for data centers.
Although Broadcom Inc. (NASDAQ:AVGO)’s stock fell slightly after it projected Q4 revenues of $14 billion—just under Wall Street’s forecast of $14.04 billion—analysts remain positive about the company’s future. The rising demand from hyperscale customers for AI networking and custom accelerators highlights Broadcom Inc. (NASDAQ:AVGO)’s strong position in the AI hardware market. Analysts, including those from Oppenheimer, point out Broadcom Inc. (NASDAQ:AVGO)’s diversified business model and robust earnings potential, making it a promising long-term investment with considerable growth potential.
Mar Vista Focus strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom Inc. (NASDAQ:AVGO) and Meta Platforms. We initiated a position in Broadcom in Q2. As a skilled aggregator, Broadcom acquires firms, streamlines their operations, and invests R&D dollars in mission critical products that generate industry leading profit margins, robust cash flows and high returns on invested capital. Its primary markets include AI accelerators targeting generative AI applications, networking & wireless semiconductors, and mission-critical infrastructure software solutions.
Broadcom is well-positioned to benefit from the rapidly expanding demand for custom AI accelerator chips that support the evolution of the generative AI market. The company is the second-largest producer of AI accelerator chips behind Nvidia and leads the market in custom AI ASIC chips. Its customers include leading hyper scalers like Alphabet and Meta who are turning to Broadcom for custom silicon due to its performance and cost advantages. We believe the company is a direct beneficiary of a multi-year capital cycle driven by hyper scalers building out next-generation AI factories…” (Click here to read more)
While we acknowledge the potential of Broadcom Inc. (NASDAQ:AVGO), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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